Dec 12, 2008—Most RFID projects are born in warehouses and distribution centers, implemented by retail suppliers looking to comply with tagging mandates levied by their customers. Tags are applied to cases and pallets of goods, then used to track these items through shipping and receiving steps.

As a vertically integrated clothing manufacturer and retailer, American Apparel took a different tack: It has begun tagging individual garments to achieve item-level visibility within several of its nearly 280 stores, more than 175 of which are located in the United States. And it's now ready to expand and integrate RFID tagging across its rapidly expanding business.

Today, this process is taking place at seven of American Apparel's New York City stores, and at one store in Santa Monica, but 10 additional New York City sites have been outfitted with RFID interrogators and will start using the technology to track merchandise in the coming months, according to Zander Livingston, the company's RFID technology director. Although American Apparel plans, in the future, to begin having garments RFID-tagged at the point of manufacture in Los Angeles, the tags are currently placed on products at the pilot stores, by shop employees.

The pilot at the company's first RFID-enabled store, located near New York City's Columbia University, required some customization of the hardware and software in order to optimize them for tracking at the item level, rather than for tracking case and pallet tags, which has traditionally been the dominant use case for RFID systems in the retail supply chain. "We had to change the way we used the hardware and tweak the software to address movement [of tagged items] from the back of the store to the front of the store," Livingston says. "Over time, we were able to achieve 99-plus percent inventory accuracy at our RFID-enabled stores."

Inventory accuracy, for American Apparel, means being able to keep the retailer's sales floors stocked—a tall order, given the wide range of colors and sizes available in the firm's extensive apparel line. And a better-stocked sales floor helps boost sales. "It's hard to give metrics, given the global economy right now," Livingston says, "but we showed a 15 percent [sales] increase in our Santa Monica store the week after we started the pilot there. A big part of the project was organizing the store in the first place, and that alone helps you increase the sales." The improved organization, he notes, resulted from handling and sorting the goods during the RFID-tagging process.